JPMorgan Chase's sweet deal for China Basin space

Andrew S. Ross, Chronicle Columnist

Published 4:00 am, Thursday, January 26, 2012

Photo: Richard Drew, Associated Press

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Marcus Ryu, third from right, president and CEO of Guidewire Software, is applauded as he rings the opening bell of the New York Stock Exchange, before his company begins trading, Wednesday, Jan. 25, 2012. Guidewire is the first technology IPO to list on the NYSE in 2012. (AP Photo/Richard Drew) less

Marcus Ryu, third from right, president and CEO of Guidewire Software, is applauded as he rings the opening bell of the New York Stock Exchange, before his company begins trading, Wednesday, Jan. 25, 2012. ... more

Photo: Richard Drew, Associated Press

JPMorgan Chase's sweet deal for China Basin space

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We have a new reigning champion of office property deals in San Francisco.

That tops the record $340 million lease deal Salesforce.com signed last month for 400,000 square feet just north of China Basin, on Fremont Street.

"This reflects our overall belief in San Francisco, especially the South of Market area," said Kevin Faxon, head of Real Estate-Americas, whose group at JPMorgan Asset Management manages more than $30 billion in assets.

JPMorgan closed the sale on the 902,000-square-foot complex late last month. The seller was Canyon Capital Realty Advisors, an investment and money management firm in Los Angeles. Canyon Capital handled the transaction on behalf of the California Public Employees' Retirement System, whose CalSmart real estate portfolio it manages.

CalPERS, which lost billions in real estate investments in the wake of the recession, announced last week the sale of its stake in 28 planned housing communities across the country, many of them unbuilt. CalPERS did not disclose the price, reported to be in the $500 million range, a significant loss.

CalPERS would not comment on the China Basin deal but appears to have made money on this one, having bought the property in 2005 for $260 million.

Canyon Capital did not comment on the deal. The San Francisco office of McCarthy Cook, a Southern California developer that has a small, minority stake in China Basin and manages the property, did not return a call requesting comment.

JPMorgan, which has other investments in San Francisco real estate, including the 192-unit luxury Strata Apartments in nearby Mission Bay, got itself a sweet deal with China Basin.

Besides being next to AT&T Park, the space, mostly offices and a smattering of UC classrooms and life-science labs, is 89 percent leased. With Dropbox, San Francisco's fast-rising cloud storage company (50 million users), and Gree, a Japanese social-gaming company, soon to move into a combined 125,000 square feet, Faxon said he expects rents to return a healthy 6 percent in income.

"In our mind, this is just the kind of office property we want to own," he said. "It's in the heart of the tech and new media boom, in a vibrant neighborhood with strong job growth.

"This is where creative tenants want to be," Faxon added, "and creative tenants are where the market is at."

Not going for it: Not too surprisingly, California Attorney General Kamala Harrishas rejected a $25 billion draft settlement between the Obama administration, states and the nation's biggest banks on deceptive home foreclosure and mortgage practices.

"At this point, this deal does not suffice for California," said Shum Preston, a spokesman for the attorney general's office.

The move comes two days after all 50 state attorneys general reviewed the proposed settlement, with the money going for principal reduction on some mortgages, cheaper refinancing on others, and a $1,800 check for 750,000 improperly foreclosed homeowners.

"Our state has been clear about what any multistate settlement must contain: transparency, relief going to the most distressed homeowners, and meaningful enforcement that ensures accountability," Preston said.

That last bit, about enforcement and accountability, has been a key sticking point for Harris, who has objected to any settlement releasing banks, including San Francisco's Wells Fargo, from further legal liability in the matter.

New York Attorney General Eric Schneiderman, appointed by President Obama to head a federal-state task force to investigate mortgage fraud, is also refusing to sign the agreement, for much the same reason, a spokesman said Wednesday.

So, "at this point," it's back to the negotiating table.

Grand opening: Ah, to ring the bell at the New York Stock Exchange the day your company goes public, and its stock price pops.

Such a day was had by Marcus Ryu, CEO of Guidewire Software, which also had the honor of being the first tech initial public offering of 2012. Opening at $13, which was above most analysts' range, it closed 32 percent higher, at $17.12, and climbed further in after-hours trading.

"It was a once-in-a-career experience," said Ryu, who co-founded the company a decade ago.

The San Mateo company develops core system software for some of the biggest names in the global property and casualty insurance industry. They include Nationwide Insurance, Zurich Financial, Tokio Marine, Dominion of Canada and Liberty Mutual.

Guidewire recorded $190 million in revenue in the past financial year and is profitable. Likened to "a graduate computer science department," it was also named the No. 1 tech company to work for in 2011 by Business Insider.

"It's very gratifying after having toiled in obscurity for 10 years," said Ryu, referring to the successful IPO. "Though we're well known in the insurance industry, we didn't know what the reception would be with institutional investors and the broader market."

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